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Twitter makes some noise with $70 million SoundCloud investment

Twitter is expected to invest $100 million into SoundCloud, with speculation abounding as to why.

Dado Ruvic/Reuters

A 3D-printed logo for Twitter. The microblogging site invested $70 million in the SoundCloud music service.

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June 15, 2016

By Ben RosenStaff

Twitter made noise Tuesday with a $70-million investment in the music service Soundcloud, perhaps one of social media's latest experiments to redefine how their users interact with music, videos, and even news.

The investment, which was first reported by Recode, is part of a round of funding expected to total $100 million. Twitter's move follows the microblogging website's April integration of Soundcloud into its Twitter Moments, enabling users to discover and share their new, favorite music.

Both Twitter and SoundCloud confirmed the investment, but declined to provide details.

When asked by The Christian Science Monitor how Twitter could further integrate SoundCloud into its platform, a spokeswoman for the music service declined to elaborate.

"This investment will enable SoundCloud to remain focused on building value for creators and listeners alike, and to continue the global rollout of many company initiatives such as our recently launched subscription service, SoundCloud Go," wrote the spokeswoman in an email. "Both companies facilitate and inspire contemporary culture to happen in real time while reaching millions of people around the world."

Some speculated the investment was an effort by Jack Dorsey, Twitter's chief executive, to increase the company's valuation as rumors circulate about who will acquire it. But Robert Siegel, a lecturer at Stanford University's Graduate School of Business and a partner at the XSeed Capital investment firm, tells the Monitor that the investment is less about its valuation and more about user engagement.

"It's another way for Twitter to dip its toes into the water of more than 140 characters," says Mr. Siegel. "The richness of communication, of Periscope, and Facebook Live, all of these social media platforms, has found new ways to engage us over and over again."

"This is less about a $70-million investment, and more about keeping ties and relationships between Twitter and Soundcloud so users have a richer experience," he says.

Since its founding in 2008, SoundCloud has been at the forefront of a major shift in music consumption, as listeners veer further towards streaming, relying less on CDs and song downloads. But SoundCloud has managed to become more than a free streaming services pioneer: it's now a go-to for musicians and listeners alike, letting artists promote their music to some 175 million users, according to The New York Times.

Originally, however, major record labels didn't like the way that SoundCloud hosted unlicensed content. In March, after SoundCloud signed new licensing deals with record companies and publishers, it launched its long-awaited SoundCloud Go subscription service, offering 125 million tracks for a monthly fee.

This isn't Twitter's first foray into music either, as it has often looked to SoundCloud to push itself more into the industry. The duo first came together in 2012 to let users listen, like, and share songs from SoundCloud without leaving Twitter, reported The Wall Street Journal. (When Twitter tried to go it alone in 2013, its Twitter #Music app flopped, to the disappointment of music executives.) Twitter eyed purchasing SoundCloud in 2014, but let the negotiation deadline expire "because the numbers didn't add up," according to The Journal.

In 2015, Rhapsody International made all of its 32 million songs available to Twitter, the first music streaming service to let people listen to a full library of licensed tunes within the social network.

Twitter's latest endeavor with music is allowing users to listen to SoundCloud within Twitter Moments, where curators such as the music blog Stereogum can create playlists and Tweet about individual songs directly.

Twitter's most recent stake in SoundCloud falls into this trend, Siegel says. How successful it will be will depend on how well it is integrated into Twitter, how easy it is to use, and its end goal: perhaps to try to expose and deliver new music to users, he says.